Cees Bruggemans: In Cyril Ramaphosa we trust – SA economy’s Last Chance Charlie

Independent economist Cees Bruggemans (right) takes a rational look at some major developments of the past week – the IMF and ratings agency reports and Eskom – and the SA Government’s reaction to it. As he explains in his inimitable manner, piling new responsibilities onto former businessman and recently appointed Deputy President Cyril Ramaphosa, is the Zuma Administration’s final roll of the dice. Or “Last Chance Charlie” in Bruggemans parlance. – AH

By Cees Bruggemans*

Since ancient times, the worst nightmare for a ship’s captain is cargo breaking loose in the hold during a storm. Loose cargo can sink you. Lashing it down then becomes the challenge. How are we doing so far with our loose cargo?

The IMF last week did not hold back. Pull up your socks, seemed to be the message. It stressed the need for structural reforms of the labour market, education and infrastructure.

SA remains prone to costly labour strikes, high wage settlements, electricity blackouts, and education achievements of the lowest order.

The IMF will be the first to acknowledge that it will take time (years) to make a difference here, to see results. But one needs to start somewhere.

On this score, it was noted that the government has begun to move on all these fronts, with the construction of power stations and transport infrastructure continuing, and addressing the governance riots at state-owned enterprises.

All this is to be welcomed. Translating it into improved economic performance will be the challenge.

On this score, two rating agencies (Fitch & S&P) appeared to give SA another chance, keeping their SA sovereign ratings unchanged for now. The main preoccupations are labour unrest and power failures (sapping our supply performance) and national finances.

Any further growth deterioration as a result of labour unrest or power failures in 2015 could lead to a ratings downgrade in June next year.

These noises and invitations by key whistleblower outsiders are rather clear and to the point. Reform or find yourself further degraded. Just as real loose cargo will do in a rudderless ship fighting the elements.

@alechogg The Neoliberal stance is nearing its death in SA the 44%+ SAns kept out of economy are already revolting.Cyril will not help this

— Mxolisi Bob (@mxola35) December 16, 2014

Meanwhile, there were mixed messages from our loose cargo.

After a few weeks from hell, Eskom seems to claim we will be safe for a few weeks through the summer. So relax, enjoy your Xmas break and get refreshed, ready to face the terrors of a new year.

News media seemed to feel all this is a confidence trick. The electricity system is now basically unstable, as recent weeks have shown rather too graphically, it apparently not only being a matter of running out of cash to order diesel.

This needs to be explored more closely, probably on live audiences (you) as we travel this learning curve together.

Meanwhile, on the political front, the kettles are boiling over as the United Front with Numsa as main organiser gets the pure socialist paradigm into shape, while the Economic Freedom Fighters led by Julius Malema were also active spreading their populist-socialist credo.

The anti-ANC jungle drums are making ever more noise, even as ANC Number Two Ramaphosa, chief fixer and heir apparent, is trying to get to grips with governance issues (SA Post Office, SAA) and infrastructure breakdown (Eskom), with a watching brief over labour relations.

So it isn’t as if anyone isn’t focused.

IMF and rating agencies are keeping our feet to the fire.

Government has rolled out its chief fixer. Instead of interpreting this as a poisoned chalice, it seems more a Last Chance Charlie reality, with more political realignment down the road as policy reform slowly crystalises.

Even so, it remains to be seen what the quality and reach of such reform is going to be, for more of the same wouldn’t be reform. That proof will be in the eating of the pudding.

Meanwhile, our socialist and populist fringes are readying to eat deeper into the governing left flank, both in political terms and presumably operationally in the economy, wherever opportunity presents itself.

And Eskom promises no further blackouts, unless these happen….

Thank goodness for some break in the weather (collapsing oil price). But it may not be enough to keep the many wolves from the door. Reform needs to be real, and effective. Even then our ongoing political realignment will remain extremely noisy and disturbing, likely keeping confidence in check.

The IMF has downgraded our 2015 GDP growth prospect to 2.1%. With a bit of oil lift, that sounds about right, given the still too loose cargo slushing around in the holds.

* Cees Bruggemans is the consulting economist at Bruggemans & Associates. His website is www.bruggemans.co.za